Decided to try out covered calls with UNG (Nat Gas). I know it's not the most popular ETF around but I figured I should be able to make money on the up and down side... whichever way the price goes.
Since the USD/CAD is showing more signs of weakness, I figured that I'd pick a commodity that's pulled back significantly on the monthly/weekly, but has strengthened a bit and could potentially entering a stage 1 basing. The price of UNG finally broke a long ass weekly descending channel. It by no means it will V bottom, but it does mean a fundamental shift in price geometry. Volume has also been heavy on the rise up leading the breakout (09/04/09 to 10/02/09), and at the current state it's still holding above the breakout point.
Here's my trade so far:
Bought UNG at: 12.05
Sold to Open Oct 12 Calls at: -0.5
Bought to Close Oct 12 Calls at: +0.3
Sold to Open Oct 11 Calls at: -0.9 (option expiration on the 11/16/09, 7 days away)
So my Break even is now at: 10.95
This position is meant for covered calls so I can generate income for the long run. Essentially I'll collect rent money until UNG gets shut down. Or, if I get striked out before options expiration, I still win. The goal is to keep selling calls against my position untill I get bored.